CSRD Reporting Guide: Requirements, Timeline & Best Practices

Sustainability reporting has moved from the margins of corporate communication to the centre of it. What was once a voluntary exercise, shaped largely by individual company choice, has become a structured, regulated practice that organisations across Europe are now required to follow.

At the heart of this shift is the Corporate Sustainability Reporting Directive (CSRD), one of the most significant pieces of sustainability legislation introduced by the European Union to date.

For organisations navigating CSRD for the first time, or revisiting their compliance strategy following recent regulatory updates, understanding the directive's purpose, scope, and requirements is an essential starting point.

This guide walks through what CSRD is, why it was introduced, who it applies to, and what organisations need to prepare for as reporting obligations take effect.

What Is the Corporate Sustainability Reporting Directive (CSRD)?

Before exploring the requirements, it's helpful to understand why the Corporate Sustainability Reporting Directive (CSRD) was introduced in the first place.

For many years, sustainability reporting across Europe lacked consistency. Organisations chose different reporting frameworks, disclosed varying levels of information, and often focused on topics they considered important. While this increased transparency, it also made it difficult for investors, regulators, and other stakeholders to compare sustainability performance across organisations.

To address these challenges, the European Union introduced the Corporate Sustainability Reporting Directive (CSRD) as part of the European Green Deal.

Adopted in 2022, the CSRD replaced the earlier Non-Financial Reporting Directive (NFRD) and established more comprehensive sustainability reporting requirements for organisations operating within and, in some cases, outside the European Union.

Today, the CSRD aims to make sustainability reporting more consistent, comparable, and reliable by introducing common reporting standards, clearer disclosure requirements, and assurance obligations. It also places greater emphasis on how environmental, social, and governance (ESG) issues affect both organisations and the wider world, making sustainability reporting an increasingly important part of corporate decision-making.

What Is the ESRS?

One of the biggest sources of confusion around CSRD reporting is the difference between the Corporate Sustainability Reporting Directive (CSRD) and the European Sustainability Reporting Standards (ESRS).

Simply put:

• The CSRD tells organisations who needs to report and why.

• The ESRS explains what needs to be reported and how it should be disclosed.

Think of the CSRD as the legislation, and the ESRS as the reporting rulebook that organisations follow to comply with it.

Developed by the European Financial Reporting Advisory Group (EFRAG) and adopted by the European Commission, the ESRS provide a common set of reporting standards for organisations preparing sustainability disclosures under the CSRD.

Their purpose is to improve consistency, transparency, and comparability across sustainability reports throughout the European Union.

The standards cover a broad range of environmental, social, and governance topics, including climate change, biodiversity, employees, business conduct, and governance.

Rather than asking every organisation to report on every topic, the ESRS are built around the principle of double materiality, meaning organisations report on the sustainability issues that are material to their business and stakeholders.

The Structure of the ESRS

The current ESRS are organised into a set of cross-cutting and topical standards.

Not every disclosure applies to every organisation. After completing a double materiality assessment, companies report only on the sustainability topics that are considered material to their business, with the exception of certain general disclosures required by ESRS 2.

Read our complete guide to Double Materiality Assessments for a step-by-step walkthrough of the process.

CSRD vs ESRS at a Glance

What Is the Omnibus I Directive? Why Is It Important for CSRD?

In February 2026, the European Union adopted the Omnibus I Directive, marking the most significant update to the CSRD since its introduction. The directive was designed to ease the compliance burden on businesses while preserving the core goals of consistent, comparable sustainability reporting.

• A much narrower scope: The most notable change is who is required to report. Under the original CSRD, companies needed to meet two of three criteria, including having more than 250 employees, to fall within scope. Under the Omnibus I Directive, mandatory reporting now applies only to companies that meet both of the following:

  • More than 1,000 employees

  • Net annual turnover exceeding €450 million

This narrows the number of companies required to report by roughly 80–90%, from an estimated 50,000 organisations down to around 5,000.

• Simplified reporting standards: Alongside the scope changes, the European Sustainability Reporting Standards (ESRS) have also been simplified. Compared to the original version introduced under the CSRD, organisations now need to report on around 60% fewer mandatory datapoints, making the reporting process more focused while maintaining the core sustainability topics.

• Sector-specific standards removed: The Omnibus I Directive also removed the European Commission's ability to introduce sector-specific ESRS standards, which were previously planned for industries such as agriculture, mining, and energy.

• New protections for smaller businesses: A further change introduces the value chain cap, which limits the amount of ESG information that large reporting companies can request from smaller suppliers and partners. This is explored in more detail later in this guide.

Together, these changes mean that while CSRD remains a significant regulatory framework, fewer organisations are required to comply, and those that do face a more streamlined set of reporting requirements.

For the wider picture, see our complete ESG Reporting Guide.

Who Needs to Comply with CSRD?

Following the Omnibus I Directive, the scope of the Corporate Sustainability Reporting Directive (CSRD) has changed significantly.

While the original CSRD was expected to apply to around 50,000 companies, the revised rules reduce that number to roughly 5,000 by introducing higher reporting thresholds.

Today, CSRD reporting primarily applies to larger organisations operating within the European Union, as well as certain non-EU companies with substantial business activities in the EU.

1) EU Companies

An organisation is generally required to comply with the CSRD if it:

• Employs more than 1,000 employees (on average); and

• Generates more than €450 million in annual net turnover.

These thresholds apply to both individual companies and parent companies preparing consolidated reports for a group.

2) Non-EU Companies

The CSRD also applies to certain organisations headquartered outside the European Union.

A non-EU company may fall within scope if it:

• Generates more than €450 million in annual turnover within the EU; and

• Meets the applicable requirements relating to its EU subsidiaries or branches.

This ensures that organisations generating significant business within the European market are subject to comparable sustainability reporting expectations.

3) What About Smaller Companies?

Many organisations that were originally expected to report under the CSRD are no longer directly within scope following the Omnibus I changes.

However, this does not necessarily mean they can ignore sustainability reporting.

Large organisations may still request ESG information from suppliers, subsidiaries, and business partners to support their own disclosures. As a result, many companies continue to collect sustainability data even when they are not legally required to publish a CSRD report.

CSRD Reporting Scope at a Glance

CSRD Reporting Timeline

The Omnibus I Directive reset not only who reports, but when. The key dates are set out below.

What Must Be Included in a CSRD Report?

A CSRD report is more than a collection of sustainability metrics. It provides a structured overview of how sustainability issues affect an organisation and how the organisation impacts people, the environment, and the economy.

While the exact disclosures depend on the results of a Double Materiality Assessment (DMA), most CSRD reports include the following components.

Double Materiality Assessment

The starting point for every CSRD report is a Double Materiality Assessment. This determines which environmental, social, and governance (ESG) topics are material to the organisation and therefore need to be disclosed.

The assessment considers both:

• Impact materiality – how the organisation affects people and the environment.

• Financial materiality – how sustainability issues may affect the organisation's financial performance and enterprise value.

ESG Disclosures

Based on the results of the materiality assessment, organisations disclose information on relevant ESG topics using the European Sustainability Reporting Standards (ESRS).

These disclosures may include information on:

• Climate change and greenhouse gas emissions

• Pollution and resource use

• Biodiversity and ecosystems

• Employees and working conditions

• Human rights across the value chain

• Business conduct and corporate governance

Not every organisation reports on every topic. Only material topics identified through the Double Materiality Assessment are included.

Anticipated Financial Effects

The CSRD also requires organisations to explain how material sustainability matters may affect their financial position over the short, medium, and long term.

This may include expected financial impacts related to climate risks, resource availability, regulatory changes, supply chain disruption, or other sustainability-related opportunities and risks.

Assurance Requirements

Unlike many earlier sustainability reports, CSRD reports are subject to limited assurance by an independent assurance provider or auditor.

This helps improve the reliability, accuracy, and credibility of reported sustainability information while increasing confidence among investors, regulators, and other stakeholders.

Digital Reporting Format

CSRD reports must also be published in a digital, machine-readable XHTML format and tagged using the European Single Electronic Format (ESEF) where applicable.

This enables sustainability information to be searched, compared, and analysed more efficiently across organisations and reporting periods.

Understanding the Value Chain Cap and Protected Undertakings

One of the key changes introduced by the Omnibus I Directive is greater protection for smaller organisations that support companies reporting under the CSRD.

Previously, businesses outside the scope of the CSRD were concerned that larger customers might request extensive sustainability information to help meet their own reporting obligations. This could create a significant administrative burden, particularly for SMEs with limited sustainability resources.

1) What Is the Value Chain Cap?

The value chain cap limits the amount of sustainability information that organisations reporting under the CSRD can request from businesses outside the directive's scope.

Instead of asking suppliers for large volumes of ESG data, reporting companies are expected to request only the information necessary to meet their own disclosure requirements.

The aim is to reduce unnecessary reporting burdens while still allowing organisations to collect the information needed for reliable sustainability reporting.

2) What Are Protected Undertakings?

A protected undertaking is an undertaking with fewer than 1,000 employees. Because it sits below the CSRD reporting threshold, it is protected from excessive sustainability information requests from larger organisations within its value chain.

While these organisations may still receive requests for certain ESG data, the information requested should remain proportionate and aligned with the value chain cap.

3) What Does This Mean for Businesses?

Even if your organisation is not legally required to prepare a CSRD report, sustainability reporting may still become part of doing business.

Large customers, investors, and business partners are likely to continue requesting ESG information to support their own reporting obligations. However, the Omnibus I Directive helps ensure that these requests remain proportionate and do not place an unnecessary burden on smaller organisations.

As a result, many organisations outside the formal scope of the CSRD are still choosing to strengthen their ESG data management processes and prepare for future reporting expectations.

Penalties for Non-Compliance with CSRD

While the CSRD aims to improve transparency rather than punish organisations, failing to comply can have significant consequences.

The exact penalties vary between EU Member States, as each country is responsible for enforcing the directive through its own national legislation.

Beyond financial sanctions, non-compliance can affect investor confidence, access to financing, customer relationships, and overall corporate reputation. As sustainability information becomes part of mainstream business reporting, inaccurate or incomplete disclosures carry increasing business risk.

The highest cost of non-compliance is often not the financial penalty itself. Organisations that prepare early are generally better positioned to build reliable ESG data processes, respond to changing reporting requirements, and demonstrate transparency to regulators, investors, customers, and other stakeholders.

How Does Terra Reporting Support CSRD Compliance?

Preparing for CSRD involves much more than producing a sustainability report once a year. It requires organisations to collect data from multiple sources, apply consistent methodologies, document every assumption, and maintain clear evidence for assurance.

Terra ESG Platform is designed to support this entire process by helping organisations centralise ESG data, automate reporting workflows, and prepare disclosures that align with CSRD and the European Sustainability Reporting Standards (ESRS).

Built on Microsoft Cloud for Sustainability, Terra combines Microsoft's data capabilities with dedicated ESG reporting workflows, allowing organisations to manage sustainability information in one structured environment.

Terra Reporting helps organisations:

• Centralise ESG data from ERP, HR, finance, operational systems, suppliers, and other business applications.

• Automate reporting workflows by assigning responsibilities, tracking progress, and reducing manual coordination across teams.

• Support Double Materiality Assessments with structured scoring, documentation, and traceable decision-making.

• Prepare ESRS-ready disclosures by mapping data to reporting requirements and maintaining consistent methodologies.

• Maintain audit-ready records with documented calculations, version history, supporting evidence, and complete audit trails.

• Improve collaboration between sustainability, finance, operations, procurement, HR, and leadership teams throughout the reporting cycle.

• Create board-ready insights through dashboards and reports that support both regulatory reporting and internal decision-making.

Rather than replacing existing business systems, Terra Reporting works alongside them, bringing sustainability data together into a single, governed environment. This reduces manual work, improves data quality, and gives organisations greater confidence in their CSRD reporting process.

As reporting requirements continue to evolve, having reliable data, structured workflows, and clear governance becomes just as important as understanding the regulations themselves.

Terra Reporting helps organisations build that foundation, making CSRD reporting more efficient, scalable, and easier to manage year after year.

Conclusion

CSRD is reshaping how organisations approach sustainability reporting. While the requirements continue to evolve, one thing remains consistent: successful reporting depends on reliable data, clear governance, and well-defined processes.

Whether your organisation is preparing for its first CSRD report or strengthening an existing reporting process, investing in the right data foundation today will make future reporting more efficient, accurate, and audit-ready.

If you're looking for a simpler way to manage ESG data, streamline CSRD reporting, and align with ESRS requirements, Terra Reporting can help.

Book a demo to see how the Terra ESG Platform helps organisations centralise sustainability data, automate reporting workflows, and prepare for CSRD with confidence.